A month has gone by since the last earnings report for Enterprise Products Partners (EPD). Shares have lost about 12% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Enterprise Products due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Enterprise Products’ Q4 Earnings Meet Estimates, Declines Y/Y
Enterprise Products reported fourth-quarter 2019 adjusted earnings per limited partner unit of 54 cents, in line with the Zacks Consensus Estimate. The bottom line declined from 59 cents per unit in the year-ago quarter.
Revenues declined to $8,005.3 million from $9,182.3 million in the prior-year quarter. However, the top line beat the consensus estimate of $7,973 million.
The fourth-quarter results were supported by higher sales volumes, and margins from the NGL Pipelines & Services business. Increased crude oil transportation volumes also aided the results. This was partially offset by lower natural gas transportation volumes and decreased operating margin from the propylene business.
Notably, in 2019, the partnership had completed construction and brought online around $5.4 billion of organic growth capital projects.
Segmental Performance
Gross operating income at NGL Pipelines & Services increased from $969 million in the year-ago quarter to $1,136 million. The upside can be attributed to higher sales volumes and average margins. A 31% increase in LPG export loadings, supported by the Enterprise Hydrocarbons Terminal expansion, aided the segment. This was partially offset by lower margins from the natural gas processing business.
Natural Gas Pipelines and Services’ gross operating income fell to $238 million from $263 million in the year-ago quarter. The downside was caused by lower natural gas transportation volumes. The partnership’s Rocky Mountain gathering systems reported lower margins in the quarter.
Crude Oil Pipelines & Services recorded gross operating income of $416.1 million, which declined from $644.3 million in the prior-year quarter on the back of lower sales margins. This was partially offset by higher crude oil transportation volumes.
Gross operating income at Petrochemical & Refined Products Services amounted to $233.7 million compared with $254.7 million a year ago. The decline was primarily caused by lower pipeline transportation volumes. Lower operating margin from the propylene business affected the segment.
DCF & Unit Repurchase
Quarterly distribution improved 2.3% year over year to 44.50 cents per common unit or $1.78 per unit on an annualized basis. This marks the 62nd consecutive quarterly increase of distribution.
Adjusted distributable cash flow was $1.6 billion, up 12% year over year, and provided coverage of 1.7x. Notably, the partnership retained $654 million of distributable cash flow in the fourth quarter. It bought back around 2.2 million units for $58 million in the fourth quarter.
Financials
During the quarter, the partnership’s capital expenditure was $1,229.6 million.
As of Dec 31, 2019, its outstanding total debt principal was $27.9 billion. Enterprise Products’ consolidated liquidity amounted to $4.9 billion, which included unrestricted cash on hand and available borrowing capacity.
Outlook
Enterprise Products expects to complete the construction of growth developments worth $3.1 billion through 2020. The projects include two NGL fractionators in the Mont Belvieu region and a third crude oil pipeline connecting the Permian Basin to Houston, TX.
It plans to further increase 2020 distribution by 2.3% from 2019 levels. The partnership also intends to repurchase units in 2020 using a portion of its cash flow from operations. The distribution hike and unit buyback will likely lead to a 5.6% increase in returned capital to limited partners from 2019 levels.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
VGM Scores
At this time, Enterprise Products has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Enterprise Products has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report
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